The Australian Taxation Office defended the proposed refit for its Moonee Ponds building in a parliamentary hearing on Friday as the agency faced questions over the need for a costly overhaul and copped criticism for failing to consult staff.

Both Labor and Coalition committee members vented doubts about the plans as assistant commissioner Andrew Closey told them the spend would cut the agency's wasted building space.

Liberal MP and committee chair John McVeigh said the ATO may have moved too fast in pushing its plans to parliament for approval without supplying detailed designs or consulting its public servants.

Mr Closey said the Tax Office had consulted staff but could not decide on more detailed plans until it received parliament's approval to spend.

Liberal MP Andrew Wallace asked the ATO to justify the spending and, after seeing a video of the plans in a closed section of the hearing, referred to a famous comedy sketch in lampooning the design as extravagant by private sector standards.

"We were talking about when we were trying to avoid the Monty Python comparisons, but I can't do it, because when I see the video I have one word in mind, and you know what I'm going to say. I'm going to say 'luxury!'.

"If I was to show people in small business or medium-sized enterprise that video and say the Tax Office want to ask to spend $36 million, there would be a riot. Because they would say 'luxury!'. 'Luxury!'."

Mr Closey told MPs the building was in need of renovation and its fit-out no longer met the ATO's needs.

Moonee Ponds could be the third ATO office to adopt hot-desking after it was rolled out in Gosford on the NSW central coast, and Docklands in Melbourne. Mr Closey defended the workplace trend - requiring workers to find a desk and pack up their belongings each day - in responding to MPs.

"It's getting people to the thought that work is something you do, not necessarily somewhere you go, and there are different places you do different activities and I can only but agree that the extent to which we can stop people just looking at computer screens in one place all day, so much to their benefit."

An unimpressed Alex Gallacher, Labor senator and long-time member of the committee approving government building projects, said in his experience the problems raised with the ATO's plans were unprecedented for the agency.

"We've always used you as an example of how to do stuff. That's why I'm really surprised we're in that situation."

He described the latest proposal as "extremely untidy".

Tasmanian Labor MP Justine Keay said the ATO's proposed desk numbers - 1200 workpoints for 1250 employees working in the building including 150 casuals - suggested it had already decided to introduce hot-desking at Moonee Ponds.

Ms Keay said there appeared to be angst among staff about the future of their office space and way of working.

"That doesn't seem to me to be communicating well with staff."

Mr Closey said casuals in the office already shared desks and that plans could change.

"We need to go out and work through what it's going to be like for the people in the building."

The ATO plans to fit out four floors at its building on Gladstone Street in works expected to finish in mid-2020, coinciding with the end of its lease. It would sign a new lease with 7200sqm or 34 per cent less room.

The parliamentary committee will later table a report about the planned renovations.